What's the lowest you have been paid for a job? That low?
If you've been following the political debate in Washington over the past year, or tuned into last month's State of the Union address, you probably heard something about the Democrats' proposal to increase the federal minimum wage to $10.10/hr and index it to inflation.
Sounds like a plan! Who wouldn't want to get paid more?
The problem is that there's this pesky little thing in economics called the law of demand. The law says that if something costs more, people tend to demand it less.
So, all things being equal, raising the minimum wage should cause employers to demand fewer workers and unemployment to rise.
This is what the Congressional Budget Office, a nonpartisan organization which analyzes economic and budgetary policy, concluded last week. They estimated that raising the minimum wage to $10.10 could cost the economy around 500,000 jobs.
To put that number in perspective, that's equivalent to about 4 months of job growth in 2013 being tossed out the window.
Okay, never mind then! Bad plan!
Perhaps. As is often the case in a system as large and complex as the US economy, all things are most certainly not equal.
An employer could respond to a minimum wage increase in a variety of different ways. They might raise their prices or make efforts to improve workplace efficiency.
And for some businesses, the benefits of a wage bump can offset some of the costs. Higher wages might result in better morale and worker productivity; they also allow businesses to save on recruitment and training costs, as employees are less likely to leave if they're being paid more.
As a result, it's hard to say exactly how minimum wage hikes affect employment. Many economic studies of past wage hikes detected little-to-no rise in unemployment.
But the CBO also found that a $10.10 wage would increase pay for 16.5 million workers (33 times the number of estimated job losses) and lift 900,000 of them over the poverty line. Economists find much more agreement on the potential benefits for the impoverished.
Do you think we should raise the wage?